In economics, the laffer curve is a representation of the relationship between rates of taxation and the resulting levels of government revenueproponents of the laffer curve claim that it illustrates the concept of taxable income elasticity—ie, taxable income will change in response to changes in the rate of taxation. In economics, the laffer curve is a representation of the relationship between rates of taxation and the resulting levels of government revenue the laffer curve claims to illustrate the concept of taxable income elasticity—ie, taxable income will change in response to changes in the rate of taxation. With the laffer curve, economists argue that if current tax rates are in the region of declining revenue (the prohibitive range), cutting taxes will both increase revenue and improve the economic situation.
Iieinder / 83 according to the media, the laffer curve was born on a napkin in a washington restaurant in 1974 this, however, 1 know to be wrong the laffer curve should perhaps be called the dupuit. The laffer curve is the most famous, non-empirical economic concept of the last fifty years the idea, famously sketched by then usc-economics professor arthur laffer, was that there was some. The laffer model countered that the primary problem is rarely demand — after all, poor nations have plenty of demand — but rather the impediments, in the form of heavy taxes and regulatory burdens, to producing goods and services in the four decades since, the laffer curve and its supply-side message have taken something of a beating. The laffer curve is correct in that eventually a high marginal tax rate creates less revenue the optimal 33% marginal tax rate is fiction as in fact any fixed absolute optimal marginal tax rate over time is fiction.
The laffer curve governments often place so-called sin taxes on goods or services such as cigarettes, alcohol, and pornography these kinds of taxes are popular with politicians because they are usually more palatable to voters than income taxes. The laffer curve is illustrated here by a two-dimensional graph the horizontal line is the tax rate that the government chooses, and the vertical line is the revenue that the government receives. The tax rate the laffer curve deals with is an average or overall rate in a progressive tax system, lower income people should be paying, approximately, a total tax of 10-15% and upper income people in the 60-70% range, comparable to the 70% that was found to give an optimal result in sweden in the 1970s [4. The original laffer curve illustrated that two tax rates lead to zero revenue: a rate of zero and a rate of 100 percent — because no one will work if all earnings are taken away.
Arthur betz laffer (/ ˈ l æ f ər / born august 14, 1940) is an american economist who first gained prominence during the reagan administration as a member of reagan's economic policy advisory board (1981-89. Laffer encouraged brownback to pursue an economic vision brownback agreed and the republican-led legislature did as it was told that vision failed on every measurement. The historical origins of the laffer curve the laffer curve, by the way, was not invented by me for example, ibn khaldun, a 14th century muslim philosopher, wrote in his work the muqaddimah: it. The laffer curve was a sketch drawn by economist arthur laffer in 1974 on a napkin in a restaurant in washington dc the curve showed that initially, higher tax rates increased government revenue, but when they were raised too high revenues would decline. The laffer curve provides a graphical representation of the relationship between tax rates and tax revenues where the tax rates of 0% and 100% provide no revenue and every other rate generates some revenue.
The aggregate (macro) laffer curve is a vertical summation of the individualistic laffer curves of all heterogeneous individuals in the society (in terms of hourly wage rate) at each tax rate based on these three assumptions, we show that even if the individualistic laffer curves are one-peaked, the aggregate laffer curve may be (and based on u. The laffer curve is a graphic representation of the relationship between an increasing tax rate and a government's total revenues the relationship suggests that revenues decline beyond a peak tax rate. A curve which supposes that for a given economy there is an optimal income tax level to maximize tax revenuesif the income tax level is set below this level, raising taxes will increase tax revenue.
Laffer has himself explained that he didn't invent the curve, but took it from ibn khaldun, a 14th-century muslim, north african philosopher indeed, many of the ideas we today associate with western free-market thinkers originated in the islamic world during the islamic golden age. Critics like to deride the laffer curve as voodoo economics by pointing to counterexamples, say of tax rate reductions that didn't increase total revenue, or by pointing to tax rate hikes that brought in more revenue but these possibilities were contained in the original laffer curve itself. The laffer curve is a (supposed) relationship between economic activity and the rate of taxation which suggests there is an optimum tax rate which maximises total tax revenue laffer curve - revision video the laffer curve concept infers that a tax rate cut could lead to an increase in tax revenue.